(a) What is the own price elasticity of demand for bicycles? Would a firm selling bicycles at the current price increase, decrease, or not change its revenue by raising the price by 1%? (b) Are bicycles a normal or inferior good in Holland? By what percentage would demand for bicycles change if average income decreased by 3%? Explain.
(a) What is the own price elasticity of demand for bicycles? Would a firm selling bicycles at the current price increase, decrease, or not change its revenue by raising the price by 1%? (b) Are bicycles a normal or inferior good in Holland? By what percentage would demand for bicycles change if average income decreased by 3%? Explain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Please see the attached question.
![The demand function for bicycles in Holland has been estimated to be
Quike
2300+ 0.02M - 5Pbike,
where M is income in Euros, Quike is the quantity demanded of bikes in units, and Pbike is the price
of bikes per unit. Suppose that the current price of a bike is 100 Euros and average income is 60,000
Euros.
=
(a) What is the own price elasticity of demand for bicycles? Would a firm selling bicycles at the
current price increase, decrease, or not change its revenue by raising the price by 1%?
(b) Are bicycles a normal or inferior good in Holland? By what percentage would demand for bicycles
change if average income decreased by 3%? Explain.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F91c2dafe-1855-4272-88f8-1fdc0be1bd56%2Ff43b8b2b-3786-4842-a5cf-9bda286be27c%2F9coczu_processed.png&w=3840&q=75)
Transcribed Image Text:The demand function for bicycles in Holland has been estimated to be
Quike
2300+ 0.02M - 5Pbike,
where M is income in Euros, Quike is the quantity demanded of bikes in units, and Pbike is the price
of bikes per unit. Suppose that the current price of a bike is 100 Euros and average income is 60,000
Euros.
=
(a) What is the own price elasticity of demand for bicycles? Would a firm selling bicycles at the
current price increase, decrease, or not change its revenue by raising the price by 1%?
(b) Are bicycles a normal or inferior good in Holland? By what percentage would demand for bicycles
change if average income decreased by 3%? Explain.
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